How do you define corruption?

Transparency International (TI) has chosen a clear and focussed definition of the term: Corruption is operationally defined as the misuse of entrusted power for private gain.

TI further differentiates between “according to rule” corruption and “against the rule” corruption. Facilitation payments, where a bribe is paid to receive preferential treatment for something that the bribe receiver is required to do by law, constitute the former. The latter, on the other hand, is a bribe paid to obtain services the bribe receiver is prohibited from providing.

Bribery and corruption are two sides of the same coin. Bribes are paid to corrupt individuals and institutions.

What is “transparency”?

“Transparency” can be defined as a principle that allows those affected by administrative decisions, business transactions or charitable work to know not only the basic facts and figures but also the mechanisms and processes. It is the duty of civil servants, managers and trustees to act visibly, predictably and understandably.

What is bribery?

Bribery is the practice of offering something (usually money) in order to gain an illicit advantage by altering the behaviour of the recipient. Bribery of officials, either in New Zealand or overseas, and of other people in charge of a public or legal duty is a crime.

The bribe is the gift bestowed to influence the recipient’s conduct. It may be any money, valuable consideration, office, or employment, or any benefit, whether direct or indirect.

Bribery and corruption are two sides of the same coin. Bribes are paid to corrupt individuals and institutions.

What is fraud?

Fraud is an intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage.

Fraud in New Zealand typically involves illegal activity on the part of individuals where the Serious Fraud Office and police have the legal backing and resources to investigate and prosecute. Fraudulent behaviour does not necessarily indicate corruption. TINZ’s mission is to oppose bribery and corruption vigorously and openly but not investigate individual cases. TINZ will involve itself directly with fraud when there is a systemic failure creating an environment that foments it.

What is a National Integrity System?

An integrity system deals with the manner with which entrusted authority is exercised. A National Integrity System is the institutions, laws, procedures, practices and attitudes that encourage and support integrity in the exercise of power. Beyond restraining the abuse of power, integrity systems should also be designed to ensure that power is exercised in a manner that is true to the values, purposes, and duties for which that power is entrusted to or held by institutions and individual office-holders, whether in the public sector, the private sector, or civil society organisations.

What is a National Integrity System Assessment?

An NIS assessment is an evaluation of the principal governance systems in a country which, if they function well and in balance with each other, help to guard against the abuse of power.

In 2013 TINZ concluded a National Integrity System Assessment based on the standard international NIS methodology developed by Transparency International extended to an assessment against wider standards of transparency, democratic participation, and accountability.

What is The Corruption Perceptions Index?

The Corruption Perceptions Index (CPI) ranks countries “by their perceived levels of corruption, as determined by expert assessments and opinion surveys.” Produced annually by Transparency International the CPI ranks countries on a scale from 100 (very clean) to 0 (highly corrupt) based on external surveys and assessments from reputable outside organisations. The CPI measures perception of corruption due to the difficulty of measuring absolute levels of corruption.

What does TI do against corruption?

TI has been dedicated to the fight against corruption since its foundation in 1993. The basic principles of TI’s anti-corruption struggle have been defined from the start: coalition building, proceeding incrementally, and remaining non-confrontational.

What does this mean? TI believes that keeping corruption in check is only feasible if representatives from government, business and civil society work together and agree on a set of standards and procedures they all support. TI also believes that corruption cannot be rooted out in one big sweep. Rather, fighting it is a step-by-step, project-by-project process. Finally, TI’s non-confrontational approach is necessary to get all relevant parties to the table. It is TI’s goal to define and introduce strategies and mechanisms that make corrupt practices if not impossible, at least unlikely and punishable, both on the national as well as on the international level.

Raising public awareness of the problem, stressing that corruption is a problem that can be tackled and that it is not a given fact of life, is the first step in this direction. That is why TI has begun by collecting, analysing and distributing information on the subject. The anti-corruption strategies and tools subsequently developed are described in detail in the Source Book, complemented by an extensive collection of practical examples for their application. The Source Book is available online as well as in print. A collection of civil society experiences and emerging strategies in countering corruption are also available in the Corruption Fighters’ Tool Kit, available both on the web and in CD-ROM format.

More than 90 national chapters (NCs) are working on strengthening integrity and transparency in their respective countries and regions. The Berlin-based secretariat (TI-S) supports the national chapters in their work and presses international bodies such as the OECD and OAS to draft international anti-corruption legislation. TI then monitors the implementation of the legislation on a country-by-country basis. TI activities around the world and in the Secretariat can be divided into awareness raising, information management, monitoring of the public and private sector, campaigning work for anti-corruption legislation, and project work.

What are the costs of corruption?

The cost of corruption is four-fold: political, economic, social, and environmental.

Political

On the political front, corruption constitutes a major obstacle to democracy and the rule of law. In a democratic system, offices and institutions lose their legitimacy when they are misused for private advantage. Though this is harmful in the established democracies, it is even more so in newly emerging ones. Accountable political leadership cannot develop in a corrupt climate.

Economic

Economically, corruption leads to the depletion of national wealth. It is often responsible for the funnelling of scarce public resources to uneconomic high-profile projects, such as dams, power plants, pipelines and refineries, at the expense of less spectacular but more necessary infrastructure projects such as schools, hospitals and roads, or the supply of power and water to rural areas. Furthermore, it hinders the development of fair market structures and distorts competition, thereby deterring investment.

Social

The effect of corruption on the social fabric of society is the most damaging of all. It undermines people’s trust in the political system, in its institutions and its leadership. Frustration and general apathy among a disillusioned public result in a weak civil society. That in turn clears the way for despots as well as democratically elected yet unscrupulous leaders to turn national assets into personal wealth. Demanding and paying bribes become the norm. Those unwilling to comply often emigrate, leaving the country drained of its most able and most honest citizens.

Environmental

Environmental degradation is yet another consequence of corrupt systems. The lack of, or non-enforcement of, environmental regulations and legislation has historically allowed the North to export its polluting industry to the South. At the same time, careless exploitation of natural resources, from timber and minerals to elephants, by both domestic and international agents has led to ravaged natural environments. Environmentally devastating projects are given preference in funding, because they are easy targets for syphoning off public money into private pockets.

Can the costs of corruption be quantified?

The short answer is “no”.

Some experts use regression analyses and other empirical methods in order to try to put a dollar figure on the cost of corruption. It is virtually impossible, though, since payments of bribes are not publicly recorded. No one knows exactly how much money is being “invested” in corrupt officials annually. And bribes do not take only monetary form: favours, services, presents and so on are just as common. At most, one can research the correlation between the level of corruption and, say, democratisation, economic development or environmental degradation.

The social costs of corruption are even less quantifiable. No one knows how much the loss of an energetic entrepreneur or an acclaimed scientist costs a country. Moreover, any estimated social costs in dollars would be inadequate to the task of measuring the human tragedy behind resignation, illiteracy, or inadequate medical care. A general scepticism vis-à-vis any attempt at quantifying the costs of corruption is thus warranted.

The following example illustrates the dilemma of pressing the issue into facts and figures:

A power plant is being built somewhere in the world, at a cost of US$ 100 million. It could be argued that – were it not for corruption – the cost could have been as low as US$ 80 million. The financial damage to the public would then be US$ 20 million.

In practice, quite often projects are planned simply so that those involved can make huge private profits. Assuming that the power plant was superfluous, the financial damage would have to be assessed at US$ 100 million. Yet no major construction project leaves the environment untouched. The results may be: increased pollution, a lowering of land prices, resettlement of local residents, an increased debt burden for the country, etc. This calculation – probably closest to reality – is immensely complex. On a global scale, it seems almost impossible. But even if one were able to calculate the environmental damage, the increase of the debt burden and other factors, how would one measure the erosion of public confidence and the deterioration of a government’s legitimacy, which are the direct result of corruption?

Where is corruption most prevalent?

At a first, indiscriminate glance, the Corruption Perceptions Index (CPI), published annually by TI, seems to confirm the stereotypical notion that corruption is predominantly a problem of the South. While the Scandinavian countries come out on top, most of sub-Saharan Africa ranks at the bottom. It would not only be wrong to conclude, however, that – according to the CPI 2007 – Somalia and South Sudan are the most corrupt countries in the world; it would also be counterproductive.

The index is not intended to brand any one country, or to pit the North against the South. Rather, it is a tool to raise public awareness of the problem and promote better governance. Corruption is as much a problem of the North as it is of the South. Recent scandals in Germany, France, Japan, the US or the UK attest to that. It is well-established checks and controls that make the difference in proportion. People are as corrupt as the system allows them to be. It is where temptation meets permissiveness that corruption takes root on a wide scale. Such an environment is more likely in the emerging democracies of the South and East. There, administration and political institutions are still weak and pay scales are generally very low, tempting officials to “supplement” their income. In dictatorial systems, meanwhile, administrative and political institutions are nothing but an extension of the usurper’s corrupt practices.

The North also carries part of the responsibility for the situation in the South due to its role as the bribe-payer. After all, it is largely Northern corporate interests that supply the bribe payments. Until recently, governments of the North not only tolerated these corrupt practices, but they even rewarded them with tax deductibility. Fortunately, the 1999 OECD Anti-Bribery Convention has made the bribing of foreign officials a criminal offence. TI has addressed this aspect with its Bribe Payers Index (BPI), the logical complement to the CPI.

In addition to the question of the regional pervasiveness of corruption, the issue of corruption by sector is also often raised. The BPI provides some statistical evidence as to which business sectors are most prone to corruption. According to these results, the problem of corruption is particularly prevalent in public works and construction, followed by the arms and defence industry. The sector with the least detected corruption was agriculture.

How does corruption affect people’s lives?

Around the globe, corruption impacts people’s lives in a multitude of ways. In the worst cases, corruption costs lives. In countless other cases, it costs their freedom, health, or money.

Here are a few examples:

In May 2000, 950 people were injured and 22 killed, when a fireworks factory in Enschede, the Netherlands, burst into flames. The explosion reached such catastrophic levels because government regulators turned a blind eye to grave security breaches with regard to storing explosives on the factory premises. In return for remaining silent, the officials are said to have received free fireworks for years. Even an illegal enlargement of the factory was legalised by the authorities a posteriori. The local government official in charge of monitoring fireworks factories in the area admitted to not knowing the specific regulations on the storage of explosives. Though considered an expert, he hadn’t read the relevant literature, nor had he taken part in any training seminars. He only followed the instructions of his superiors, one of whom was arrested on corruption charges two years ago.

A Swiss activist for the rights of the Penan, a nomadic people in the Malaysian rainforest, has been missing since May 2000, after he successfully drew international attention to the problem of the unscrupulous logging of Borneo’s woods. Turning rainforest into palm plantations, the logging companies and government officials destroy the habitat of the indigenous rainforest nomads. In addition to threatening the lives of the Penan and those who fight for them, the excessive logging in Borneo contributes to the worldwide problem of deforestation, affecting the earth’s climate. The corrupt co-operation between loggers and government also hurts the Malaysian people on the whole, as the money made by logging companies does not flow back into Malaysia’s economy. A 1993 study showed that “log exports to Japan were under-declared by as much as 40 percent, thereby reducing the amount of export tax paid to the national treasury”. (Sizer, Nigel: Practical Measures for Promoting Integrity and Curbing Corruption in the Forest Sector: A Contribution to the World Commission on Forests and Sustainable Development. Washington, D.C.: World Resources Institute, 1997.)

Other examples of the impact of corruption abound: take the residents of shanty towns, who need to pay off city officials so that the little bit of living space they have built does not get torn down; or citizens harassed by police in their daily activities, having to pay left and right only to go about their business. Some bureaucracies only work if they are enticed by additional “rewards”.

In any case, grand and petty corruption is making life more difficult or outright threatens the lives of many people all over the world.

What kind of environment does corruption need to thrive in?

As indicated above, corruption thrives where temptation coexists with permissiveness. Where institutional checks on power are missing, where decision making remains obscure, where civil society is thin on the ground, where great inequalities in the distribution of wealth condemn people to live in poverty, that is where corrupt practices flourish.

It cannot be stressed enough that corruption is alive and well even where political, economic, legal and social institutions are well entrenched.

For more details on specific conditions, please refer to Transparency International’s Source Book.

Can corruption be seen as normal or traditional?

Critics argue that the fight against corruption is just another case of the West trying to impose its views and values on the South. Some go on to say that gift giving and taking in the public realm is a normal tradition in many non-Western cultures.

The debate over cultural relativism and neo-colonialism is a contested one. Where concepts like public procurement procedures are unknown concepts, bribing public officials to secure public works contracts does not exist. Norms and values are context-bound and vary across cultures. Gift-giving is part of negotiating and relationship building in some parts of the world. But cultural relativism ends where the Swiss bank account enters the scene. It is a matter of degree: there are limits in all cultures beyond which an action becomes corrupt and unacceptable.

When Olusegun Obasanjo, now President of Nigeria, criticised the corrupt practices of the dictatorial regime of Sani Abach, he was imprisoned. He once commented that, in African tradition, “a gift is made in the open for all to see, never in secret. Where a gift is excessive, it becomes an embarrassment, and is returned.” (Olusegun Obasanjo, “Positive Tradition Perverted by Corruption”, Financial Times, 14 October 1994)

It is precisely in order to account for cultural differences that TI has developed its national chapter system. People anchored in their societies have the best sense of what is customary, and what is a violation of the norm. Clearly the abuse of power for personal gain, the syphoning off of public or common resources into private pockets is unacceptable in all cultures and societies.

Are democracy and corruption (ir-) reconcilable?

In a modern democracy, the power of governing bodies is inherent in the political mandate given by the people. Power is entrusted and it is supposed to be used for the benefit of society at large, and not for the personal benefit of the individual that holds it. Thus corruption – misusing publicly entrusted power for private gain – is inherently contradictory and irreconcilable with democracy.

That does not mean, unfortunately, that corruption cannot be found in democratic systems. Temptation remains a challenge anywhere. That is why it is all the more important to put in place control mechanisms and establish systemic hurdles to prevent people from abusing their power, as TI is seeking to do. Such mechanisms are more easily drawn up and introduced in established democratic systems, however, than in newly democratic or non-democratic ones.

Actively promoting a world with trusted integrity systems in which government, politics, business, civil society and the daily lives of people are free of corruption. TINZ is a member of Transparency International, the international organisation leading the movement to eradicate corruption and bribery wherever they occur.